Question 1

The consumer price index is

Accepted Answer

A) not very useful as a measure of the cost of living. 
B) a perfect measure of the cost of living. 
C) a useful measure, but not a perfect measure, of the cost of living. 
D) not used as a measure of the cost of living. 
A) not very useful as a measure of the cost of living. 
B) a perfect measure of the cost of living. 
C) a useful measure, but not a perfect measure, of the cost of living. 
D) not used as a measure of the cost of living.

Question 2

In an imaginary economy,consumers buy only sandwiches and magazines.The fixed basket consists of 20 sandwiches and 30 magazines.In 2006,a sandwich cost $4 and a magazine cost $2.In 2007,a sandwich cost $5.The base year is 2006.If the consumer price index in 2007 was 125,then how much did a magazine cost in 2007?

Accepted Answer

A) $2.50 
B) $2.80 
C) $3.20 
D) $3.45 
A) $2.50 
B) $2.80 
C) $3.20 
D) $3.45

Question 3

About what percentage of U.S.consumer spending is accounted for by expenditures on food and beverages?

Accepted Answer

A) 6 percent 
B) 11 percent 
C) 15 percent 
D) 20 percent 
A) 6 percent 
B) 11 percent 
C) 15 percent 
D) 20 percent

Question 4

Suppose the price index in 2004 was 104;the price index in 2005 was 134;and the inflation rate between 2005 and 2006 was higher than it was between 2004 and 2005.This means that

Accepted Answer

A) the price index in 2006 was higher than 134.00. 
B) the price index in 2006 was higher than 164.00. 
C) the price index in 2006 was higher than 172.65. 
D) the price index in 2006 was higher than 182.22. 
A) the price index in 2006 was higher than 134.00. 
B) the price index in 2006 was higher than 164.00. 
C) the price index in 2006 was higher than 172.65. 
D) the price index in 2006 was higher than 182.22.

Question 5

If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years,then you need to be making $37,850 to have kept pace with consumer price inflation.

Accepted Answer

A) True 
 B)False

Question 6

Social Security payments are indexed for inflation using the CPI.A recent newspaper editorial claimed that Social Security recipients are harmed by years of low inflation because they do not receive as large an increase in their payments as they do in years of high inflation.Which of the following statements is correct?

Accepted Answer

A) The newspaper editorial is correct under all circumstances. 
B) The newspaper editorial is correct if the market basket consumed by Social Security recipients is the same as the market basket used to compute the CPI. 
C) The newspaper editorial is correct if the prices of the goods consumed by Social Security recipients increase faster than the prices of the goods in the market basket used to compute the CPI. 
D) The newspaper editorial is correct if the prices of the goods consumed by Social Security recipients increase more slowly than the prices of the goods in the market basket used to compute the CPI. 
A) The newspaper editorial is correct under all circumstances. 
B) The newspaper editorial is correct if the market basket consumed by Social Security recipients is the same as the market basket used to compute the CPI. 
C) The newspaper editorial is correct if the prices of the goods consumed by Social Security recipients increase faster than the prices of the goods in the market basket used to compute the CPI. 
D) The newspaper editorial is correct if the prices of the goods consumed by Social Security recipients increase more slowly than the prices of the goods in the market basket used to compute the CPI.

Question 7

In an imaginary economy,consumers buy only shirts and pants.The fixed basket consists of 6 shirts and 4 pairs of pants.A shirt cost $20 in 2006 and $25 in 2007.A pair of pants cost $30 in 2006 and $40 in 2007.Using 2006 as the base year,which of the following statements is correct?

Accepted Answer

A) For the typical consumer, the number of dollars spent on shirts is equal to the number of dollars spent on pants in each of the two years. 
B) The consumer price index is 134 in 2007. 
C) The rate of inflation is 29.17% in 2007. 
D) All of the above are correct. 
A) For the typical consumer, the number of dollars spent on shirts is equal to the number of dollars spent on pants in each of the two years. 
B) The consumer price index is 134 in 2007. 
C) The rate of inflation is 29.17% in 2007. 
D) All of the above are correct.

Question 8

Babe Ruth,the famous baseball player,earned $80,000 in 1931.Today,the best baseball players can earn more than 300 times as much as Babe Ruth earned in 1931.However,prices also have risen since 1931.We can conclude that

Accepted Answer

A) the best baseball players today are about 300 times better off than Babe Ruth was in 1931. 
B) because prices have risen also, the standard of living of baseball stars hasn't changed since 1931. 
C) one cannot make judgments about changes in the standard of living based on changes in prices and changes in incomes. 
D) one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931. 
A) the best baseball players today are about 300 times better off than Babe Ruth was in 1931. 
B) because prices have risen also, the standard of living of baseball stars hasn't changed since 1931. 
C) one cannot make judgments about changes in the standard of living based on changes in prices and changes in incomes. 
D) one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931.

Exam 24: Measuring the Cost of Living

The consumer price index is

About what percentage of U.S.consumer spending is accounted for by expenditures on food and beverages?

Suppose the price index in 2004 was 104;the price index in 2005 was 134;and the inflation rate between 2005 and 2006 was higher than it was between 2004 and 2005.This means that

If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years,then you need to be making $37,850 to have kept pace with consumer price inflation.

In an imaginary economy,consumers buy only shirts and pants.The fixed basket consists of 6 shirts and 4 pairs of pants.A shirt cost $20 in 2006 and $25 in 2007.A pair of pants cost $30 in 2006 and $40 in 2007.Using 2006 as the base year,which of the following statements is correct?

Babe Ruth,the famous baseball player,earned $80,000 in 1931.Today,the best baseball players can earn more than 300 times as much as Babe Ruth earned in 1931.However,prices also have risen since 1931.We can conclude that

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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